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The impact of financial crises on the syndicated loan spreads applied to public and private firms

Danilo Drago and Raffaele Gallo

Journal of Financial Stability, 2020, vol. 46, issue C

Abstract: We investigate the impact of financial crises on the syndicated loan spreads applied to public and private firms. We found evidence of a greater increase in loan spreads for European public firms than for private ones during the global financial crisis and the euro area sovereign debt crisis. This result is consistent with our hypothesis that public firms’ borrowing costs are more sensitive to financial market swings than those of private companies. Our results hold when we control for relationship banking effects, a different sample composition between crisis and non-crisis periods, estimating a propensity score matching, and adopting a sample of syndicated loans to US public firms.

Keywords: Financial crisis; Syndicated loan; Public firm; Loan spread; Market sensitivity (search for similar items in EconPapers)
JEL-codes: G01 G20 G21 G32 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jfs.2019.100718

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Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

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